This week, between October 26th and 29th, the Chinese Communist Party is meeting in Beijing for their fifth plenum during which time they will draft the country’s 13th Five Year Plan (第十三个五年规划). This is a time when the political elite of the world’s most populous country will lay the blueprints for the near future of the People’s Republic, proposing policies ranging from economic growth to environmental protection.
Beijing has already laid out several of the goals of the next five year plan, although many of the details will be determined during this week’s plenum. In regards to economy, China’s leadership aims to double the size of its real economy by 2020, requiring a yearly minimum growth of 6.5%. While this pales in comparison to the double digit annual growth percentages that China has exhibited in the past, it still is questionable whether China will be able to maintain this growth model in light of its recent economic woes. Its current estimated growth percentage, 6.9%, is the slowest growth rate that the country has experienced since the financial crisis of 2009. This number can be expected to continue dropping as Beijing attempts steering the country towards a more sustainable, consumer-driven economic model.
In addition to potentially revamping its economic goals, China’s new Five Year plan can be expected to continue increasing stimulus programs to help ease the pain of slower economic growth. Its fiscal spending has increased 26% since August of last year, benefiting sectors such as healthcare, education, and environmental protection. These factors that encompass the overall category of public welfare in China can expect to remain favored by the 13th Five Year Plan as the country strives to improve the overall quality of life for its citizens. Additionally, more comprehensive transportation and infrastructure development within and between cities will also be highlighted in the new plan, so as to continue relieving stress from China’s road systems and environment.
This plan is also expected to favor three main sectors: internet-plus, the services sector, and other industries that will aid the country’s technological development capacity. This, combined with the potential liberalization of China’s currency, could spark a revolution in the quality of China’s production (i.e. from common place household items to biomedical technology and internet tech). While this will be a boon to China’s emerging technological and energy-based companies, its traditional industries of steel, cement, and paper can expect to suffer from loss of favor and stricter environmental regulations.
While ambitious in its goals, it now remains to be determined whether China’s newest Five Year Plan will be effectively executed or whether its traditional problems with corruption, poverty, and political repression will stunt the continued growth of the country.
http://www.barrons.com/articles/how-to-invest-in-chinas-13th-five-year-plan-1445218483
It will be interesting to see if the government will continue to cut interest rates and devalue their currency in the coming years, as these policy changes show signs of a sputtering economy.
How fast could a nation-wide shift in production come? I feel like building the infrastructure and changing to a tech or service based economy will take time, and they won’t have much more than the footholds set up by the end of this 5 year period.
“Rebalancing” will indeed be a gradual process. Can that progress smoothly, that is, without “social disruption”?
The new 5-year plan appears to be focusing on the right things. It is unfortunate that there was no mention of Hukuo reform.
In what sense is the 13th FYP actually a “plan”? China’s is not a socialist economy with wide sectors of activity controlled by the State (or more precisely, by Beijing and the various provinces and within provinces large cities). So is this mere wishful thinking? Or an attempt to map out likely changes in the economy, as an aid to planning infrastructure development [as mentioned] and government services and the like?
The 13th Five Year Plan seems to be a “plan in name alone. Based on the patterns of information release we observe, China wants to appear as though it has a more complete handle of its own economic trajectory that it does. Following low growth numbers (6.9% in Q3), China announced last week it was cutting interest rates again and that it was allowing banks to lend more, moves that are characteristic of much lower growth than 7%. Indeed, many economic agencies seem to agree China’s economic growth was lower than reported, so the release of such a “plan” can act as an assurance to casual observers that the government understands where the country is headed and that it remains on course to achieve the goal Kyle laid out of doubling the economy by 2020.
Seeing as Five Year Plans in the past have rarely unfolded as intended (just as the 2016 plan’s 6.5% growth rate is unlikely to be met), have there been any moves by the Chinese government in restructuring the process with which they implement economic decisions? I feel as though trying to set economic goals five years into the future by looking at the environment of today is a system that is inherently flawed.
EDIT: Meant to post this as a stand-alone comment. Oops.
Well, from a US perspective, isn’t a FYP something we’d presume undesirable? If so, then “not working” may be good … let the market reign, not the emperor, er, Premier?!
Keep in mind, though, that every large company (and most small) undertake some form of planning. So what sorts of decisions or (repetitive?) behavior is “planned” and what is allowed to respond to … whatever, including managerial discretion.